Lump sum pension payout is very common kind of pension plan that is preferred by most of the companies these days. But it is important to know about the pros and cons of your annuity distribution once you decide taking up one. Before you actually start investing, you must analyze these things carefully.

Given below are some pros and cons of lump sum pension payout.
Advantages of annuity distribution:

• It provides access to your money the way you want.
• You can also generate the similar income as provided by the annuity as well as retain complete control over the principles provided it is properly managed.
• It provides a guaranteed income.
• It is also free from all kinds of responsibilities or investment management.

Drawbacks of lump sum pension payout:

• Having complete access to annuity also makes it much easier to spend the whole of the amount.
• The amount is likely to disappear very quickly if it is not managed or invested in a proper manner.
• Though this plan provides guaranteed income but it then depends on financial stability with respect to your former employer. The improper management of pension funds may also lead to significant reduction in the pension benefits.
• The amount that is fixed on monthly basis does not remain the same with the inflation effect.

Proper understanding of all these advantages as well as drawbacks of such an annuity distribution can be a great help towards proper management of everything. This again helps in comparing the return rates against the risks involved in this kind of pension plan.

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